《20 / 80 時代 智富路》- 劉創楚

《20 / 80 時代 智富路》- 劉創楚

The name of this book "20/80" means the top 20% of people get a larger and larger proportion of income.

This book includes philosophy of financial management (i.e. financial planning, asset allocation, modern portfolio theory by Harry ), the principles of investment( i.e. compounding, business philosophy, value investing) and investing management ( i.e. panic investing, theme investing)

Frankly speaking, the author just makes the ideas a little bit complicated (especially the first half of the book), but the underlying concepts are easy to understand, he can actually keep them simpler. But overall, it is a good book with rich contents; I like the second half of the book more since it briefly tells the situation of China. I just get a feeling that China is running on a similar road of previous HK.

Points to note:

-force saving, live below your means

-buy index fund instead of the financial products of the bank to save transaction cost and selection effort

-be alert to the saving rate of different banks

- Government bond vs. cash (bond > more protective against inflation rate)

- Prerequisite of focus investing > you know well about what you are investing

- What determine the return ( 91.5% asset allocation, 4.6% selection, 1.8% timing)

-stock market (the longer the time, the lower the risk)

-Gini Coefficient 堅尼系數 ( assuming that there are ten people, if GC =0, everyone can get 10% of total income. If GC = 1, one person gets all the income) HK is now 0.43 ( year2009)

-either good at choosing the best timing or selecting the best can make you succeed

4 rules to pick good companies by Peter Lynch
1) research on the company should be done continuously

2) the company should be as simple as possible ( Warren “you should invest in the business that you know very well")

3) Niche (others cannot follow and can differentiate with the others and others cannot easily enter the market to compete with you)> "business franchise with profit royalty due to some historical factors - people have inertia to it >>mentioned by Warren" e.g. Wall Street Journal, Cola coke, HKEx, China Mobile

4) Earnings

-Peter Lynch "good companies must have good performance in long term but may not in short term"

*******

-Warren Buffett "there is no fast track to earn a lot, being rational is needed" "a share in a business" " acquiring a good company (consider the time factor to predict its future ) with reasonable price instead of acquiring a bad business with low price"

- Warren " picking stocks in the banking and insurance industries > focus on good management> must be good at controlling risk and cost, asset allocation"

- Victor Sperandeo " preservation of capital> consistent profitability> pursuit of superior returns">risk management

-Benjamin Graham "value investing> know the intrinsic value from fundamental analysis > waiting for the business cycle>margin of safety

3 main parts of value investing
1) Business - ability testing ( simple and understandable business) , operating testing ( time is the indicator), prospect testing ( natural franchise without the control of government)

2) Financial status - ROE ( + consider the liability) , marginal profit ( net profit) , $ 1 test ( if the company reserve $1 revenue instead of giving dividends and the stock price cannot increase $1, then the investing ability is not high)

3) value - find out the intrinsic value of a company ( cash flow + the growth rate of return) and compare with the current price

-Tony Measor " The investor may gain even the stock price doesn't increase in short run> shares replace dividends> investors can get more shares if the stock price is low (ROE + increasing dividends> indicator of good companies)

-how to position in the bear market > don't do expectations but make use of the volatility of stock price

- the features of the bull market 1) historical high price 2) low dividend rate> lower than bond rate 3) everyone plays in the stock market 4) many companies including the bad ones issues IPO

-3 insights of an investor (1) money making outside HK not inside, don't focus on stocks in property industry 2) take advantage of china's economic growth 3) find business franchise)

- appreciation of Reminbi harms manufacturing industries (unemployment, company’s bankruptcy) and stability of financial market but benefits “cheap Reminbi” industries including exported add-valued industries

- How to deal with the “crash” created by appreciation of Reminbi > revolution of tertiary industries

-the economic transformation of China> turn to heavy industries/ high-tech industries ( it is hard because it requires creativity)

6 trends in China

1) Stable & high economic growth rate with less volatility (around 8.5-10%)

2) The end of the era of cheap labour ( due to one child policy in 1979)

3) Inflation in China ( HK is facing the dilemma of high inflation rate but low interest rate ( due to linked exchange rate system of US Federal Reserve Board)

4) The end of the leading manufacturing industries > >tertiary industries

5) Balance of trade ( reduce trade surplus and thus reduce the conflicts between trade partners)

6) The end of fixed rate of Reminbi

《香港溫布頓》- 蔡東豪

Wimbledon HK《香港溫布頓》- 蔡東豪

I knew this book from Mingpao website and this book was also read by 曾俊華.

It is an inspiring book which tells how the author thinks about maintaining the status of financial centre of Asia and overcoming the challenges. With the unique opinions of the author, readers can know more about the prospect of HK financial market.

The author is actually quite positive about HK's future although Chinese government intends to boost Shanghai as another financial centre. However, the general environment in China is now still immature (i.e. government policies, controls over the financial market ( the over-intervention in the stock market harms the basic rules of market mechanism)and the quality of investors, conflicts of interest ). Thus, HK can still take a free ride of the boom of economy in China.

How to maintain the status of financial centre and overcome the challenges:

1) attract more foreign talents to HK financial market

2) protect and improve the brand of our financial centre status by enforcing fair & strict internal controls to differentiate ourselves from Shanghai

3) accept the " Wimbledon effect"

The author promotes the market mechanism ( efficient/self-regulated market with few government interventions) and he thinks that protectionism is the emeny of economic growth ( the name of the book includes the word " Wimbledon", it refers to " Wimbledon effect" - Britain holds the well-known tennis competition in Wimbledon every year but rarely one british won the competition. However, this competition brings huge capitals, employment oppportunities. This reminds me of the phrase " the winner in the curse" ) With reference to this phenomenon og the London global financial centre status, the top financial institutions are foreign companies since they indirectly raise the quality and bring new ideas to London financial market

4) maintain the fair game rules of the financial market >" survival for the fittest", one can get reasonable rewards according to his ability > so the phenomenon of wide gap between "Haves" and "Have-Nots"(i.e. wealth gap) should not blame on the fair financial market and government should not hamper the growth of financial market with the excuse of wealth allocation ( you rarely see a mediocre with a brilliant family background survives in multi-national investment bank)

5) maintain a mature and "energetic" stock market with high liquidity, huge and fast info flow

6) simple-structured financial products can reduce unneccessary risk

I remember Prof. Wong said that bond market is not popular in HK because we all like gambling :) The author gives me a new insight > government and entreprises do not have a culture to issue bonds, banks can already earn a lot of money relying on the property industry and it is no need to rely on high risk debitors...therefore, the supply ( from banks) is suppressed.

As for the inactive commoditiy market, HK is not the place of production/ agglomeration, the investors are also unfamiliar with it.

7) improve the fairness of financial market >replace the primitive method with electronic method when buying IPO stocks ( some cornerstone investors just pay one or two days before getting the new shares but general public needs to pay 3 weeks in advanced) >it is hard to change as banks can get a huge profit in margin lending

This video is a short summary of the book

http://www.rthk.org.hk/special/awardpro/award07/onhongkong_tsoi.htm

《致富王道-8個投資金律》- 朱凱婷, 鄧聲興

《致富王道-8個投資金律》- 朱凱婷, 鄧聲興

This book is well-written and easy to read. ( that's why I could finish it within a few hours) I read it even during the exam period. It is obviously much more interesting than the academic stuffs and boring textbooks.

It interviewed 8 experienced investors and celebrities and they shared their ways of doing business, investing and financial planning. (it just briefly illustrates these, not digging too deep so far) It is more likely to tell the readers about the mindset and financial quotient (more on financial EQ) of a successful investor.


Points to note for myself :

- Investment Chronicle, Financial times, financial report

-invest sth unrelated to general economic environment e.g. red wine future ( reflect demand and supply > increase in value since supply < demand) - cannot neglect external factors apart from purely the company's performance when doing investments (e.g. the impact of derivatives e.. future, warrent, Hedge fund etc on the share price) - younger> higher risk tolerance level

-increase in interest rate is not benefitical to the market, vice versa

-in China, 30% people have mobile phone, 10% in rural area> China mobile (941) :)

-淡市(it implies low transactions)入市，stable stock price which may not reflect the true value of the stock, 抗跌力強, 更有上升動力 ( since everyone is holding money, when this purchasing power releases again> high return rate)

-knowing how to play around with the derivatives instead of risky stocks by using a small amount of money to train the finanical skills especially for the youth

- beginners with limited capital should not diversify your stocks too much, choose high-quality stocks for long-term investments

- Derivatives are very good educational tools, because the buyers not only have to consider the share price, but also other factors, e.g. implied volatility, gearing power> train the risk management skills

- be calm and analytical when everyone is crazy in the stock market

- the motivation for the stock price increases > good global economy, low inflation rate, having econoic growth

- HK stock money is always greatly affected by American economy ( American funds lead the global stock market and lots of HK stocks are hold by Americans)

- having less capital> speculative approach , having more capital> conservative approach

- release the pressure > sell the stock which can already cover the cost of purchasing, then trade stocks with no cost

- grasp the economic cycle > buy stock at the beginning of bull market, sell at the end of the bull market

-know how to do short selling> earn a lot when the stock market collapses

-long term investment > 10 years...concentrate on the potential of future growth, cash flow

-short term investment > spending few capitals on diversified small stocks

- using PE ratio to determine whether buy the stocks is not precise enough>>> we have to consider the potential growth as well > so PEG = PE/EPS is more accurate to measure the value

-《曾氏通道》 > shows the opportunities of buying and selling ?!? ( have to figure out more about it later)

-demand for real estates with lower value is greater than the higher ones> higher liquidity

-investment percentage on stocks should be larger than real estates

- have to consider regional factors ( land price) , the govenment land policy when acquiring real estates> the power of growing value and generating rent return

- the producing cycle of real estates is long, it is not as flexible as the stock market, it changes less frequently

- dealing with the problem of increasing inflation rate and maintaining living standard> investment

-somehow the stock market is efficient, the stock price has already reflected the impact of annual report or news> so need to investigate the lower and upper courses the particular industries and company's future

P.S.* since it is borrowed from the library, a previous reader highlighted a lot of things in the book by using a pencil, and I couldn't help laughing when I saw he highlighted "女朋友是基金經理"...just wondering why he regarded it as one of the main points...lol

uhuhuh, I have to focus on the boring exams again....